18 Jun 2018
By Kevin Gahagan

What’s Ahead For Mortgage Rates This Week – June 18th, 2018

Financial Reports

What’s Ahead For Mortgage Rates This Week – June 18th, 2018Last week’s economic reports included the post-meeting statement by the Fed’s Federal Open Market Committee along with readings on retail sales and inflation. Weekly reports on mortgage rates and new jobless claims were also released.

Fed Raises Key Interest Rate on Strong Economic Indicators

The post-meeting announcement by the Federal Open Market Committee of the Federal Reserve indicated that committee members voted to raise the target federal funds rate to 0.175 to 2.00 percent from the prior rate of 1.50 to 1.75 percent.

The post-meeting announcement cited strong economic conditions and stated that FOMC had altered their outlook from three rate increases in 2018 to four increases. This news is significant to consumers as banks and credit card companies typically raise lending rates in response to Federal Reserve actions.

Committee members were closely divided on interest rate forecasts for 2018. Eight members said that the Fed rate would likely increase four times in 2018 while seven members said three rate increases would be appropriate. The post-meeting statement also cited concerns over inflation and Fed Chair Jerome Powell said that raising interest rates too fast could increase the risk of recession.

Consumer Price Index, Retail Sales Rise in May

The Consumer Price Index rose from 0.10 percent in April to 0.20 percent in May according to the Commerce Department. The Core CPI, which excludes volatile food and fuel sectors, was unchanged at 0.20 percent against expectations of 0.20 percent growth and 0.20 percent in April.

Retail sales rose 0.80 percent in May as compared to expectations of 0.40 percent growth and April’s growth rate of 0.40 percent. Retail sales excluding the automotive sector rose 0.90 percent in May; analysts expected a reading of 0.50 percent based on April’s reading of 0.40 percent growth.

Mortgage Rates Rise, New Jobless claims Fall

Freddie Mac reported higher mortgage rates last week. The average rate for a 30-year fixed rate mortgage averaged eight basis points higher at 4.60 percent; the average rate for a 15-year fixed rate mortgage rose six basis points to 4.07 percent.

Rates for a 5/1 adjustable rate mortgage were nine basis points higher at 3.83 percent on average. Freddie Mac analysts said that demand for homes is holding steady despite higher mortgage rates.

First-time jobless claims fell by 4,000 new claims to 218,000 new claims filed. Analysts expected 225,000 new claims to be filed based on the prior week’s reading of 222,000 new jobless claims filed.

What‘s Ahead

This week’s scheduled economic reports include NAHB Housing Market Indices, Commerce Department readings on housing starts and building permits issued and National Association of Realtors® reports on sales of previously-owned homes. Weekly readings on mortgage rates and new jobless claims will also be released.

11 Jun 2018
By Kevin Gahagan

What’s Ahead For Mortgage Rates This Week – June 11th, 2018

Financial Reports

What’s Ahead For Mortgage Rates This Week – June 11th, 2018Last week’s economic reports included analyst assertions that U.S. housing markets are overvalued in over 50 percent of markets. Weekly reports on mortgage rates and first-time jobless claims were also released.

CoreLogic: Over Half of Top 50 U.S. Housing Markets Overvalued

Rapidly rising home prices are causing some U.S. markets to be overvalued, which means that home prices are higher than a community’s ability to sustain. What goes up must come down in such scenarios, but home prices continue to grow in many areas.

While Boston, Massachusetts and San Francisco, California continued to see rapidly rising home prices, analysts said that residents of the two cities had incomes sufficient to meet the cost of homes. Examples of cities where home prices were overvalued in April included os Angeles, California, Denver, Colorado and Washington, D.C. Supplies of available homes have fallen over the last three years.  Real estate pros and analysts continue to cite building more homes is the only solution to the shortage.

The National Association of Realtors® said that although supplies of new homes have increased in recent months, most newly built homes are priced for move-up buyers. Moderate-income and first-time buyers haven’t seen much improvement in available affordable homes. Rising mortgage rates in recent months also presented an obstacle to finding affordable homes.

Mortgage Rates, New Jobless Claims Fall

Freddie Mac reported lower average mortgage rates last week. Rates for a 30-year fixed rate mortgage fell two basis points to 4.54 percent; rates for a 15-year fixed rate mortgage were five basis points lower at an average rate of 4.01 percent. Rates for a 5/1 adjustable rate mortgage averaged 3.74 percent and were six basis points lower. Discount points for 30-year fixed rate mortgages averaged 0.50 percent; discount points for 15-year fixed rate mortgages and 5/1 adjustable rate mortgages averaged 0.40 percent.

First-time jobless claims fell last week despite predictions that they would rise. 222,000 new claims were filed as compared to expectations of 225,000 new claims and the prior week’s reading of 223,000 new claims.

What’s Ahead

This week’s scheduled economic releases include the post-meeting statement from the Federal Reserve’s Federal Open Market Committee, readings on consumer prices and retail sales. Mortgage rates and new jobless claims will also be released.

29 May 2018
By Kevin Gahagan

What’s Ahead For Mortgage Rates This Week – May 29th, 2018

Financial Reports

What’s Ahead For Mortgage Rates This Week – May 29th, 2018Last week’s economic reports included readings on sales of new and previously-owned homes along with weekly readings on mortgage rates and new jobless claims.

Home Sales Lower in April

Sales of new and previously-owned homes were lower in April. The Commerce Department reported sales of new homes at a seasonally-adjusted annual rate of 662,000 sales. New home sales were 1.50 percent lower than for March, but were11.60 percent higher year-over-year.

Analysts expected new home sales to rise to 682,000 sales based on the March reading of 672,000 new homes sold.  Sales of new homes are calculated based on a small sample of sales and are typically subject to adjustment. Year-to date sales were 8.40 percent higher year-over-year.

New home sales were downwardly revised for the past three months, which could indicate a slowing in the market. Higher interest rates and rising home prices may be taking a toll on buyer enthusiasm. Fewer buyers caused the inventory of homes for sale to increase to a 5.40month supply. Real estate pros typically consider a six-month supply of available homes a normal inventory of homes for sale.

Sales of previously owned homes were also lower in April; the National Association of Realtors® reported seasonally-adjusted annual sales of 5.46 million homes as compared to expected sales of 5.50 million and March sales pace of 5.60 million sales of previously-owned homes. While fewer sales can relieve demand and ease rising home prices, it appeared that potential buyers are waiting for more options.

Sales of pre-owned homes were 2.50 percent lower than for March and were 1.40 percent lower year-over-year; this was the second consecutive month for a lower year-over-year sales reading. The inventory crunch of pre-owned homes for sale has reduced the average sales period to decrease to 26 days.

Mortgage Rates Rise, Sideline Buyers and Sellers as New Jobless Claims Rise

Freddie Mac reported the highest average mortgage rates in seven years. 30-year mortgage rates averaged 4.66 percent; rates for a 15-year fixed rate mortgage averaged 4.15 percent and rates for 5/1 adjustable rate mortgages averaged 3.87 percent.

Discount points averaged 0.40 percent for fixed rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages. Mortgage rates have not risen so fast at the beginning of the year for 40 years. Analysts at Freddie Mac said that home sellers, as well as buyers, may be sidelined as inventories of homes shrink and mortgage rates rise. This could mean that sellers as well as buyers will wait until market conditions and mortgage rates ease.

First-time home buyers accounted for 33 percent of existing home sales; this was lower than the average of 40 percent. First-time buyers are important to real estate markets as their purchases of pre-owned homes enable homeowners to buy their next homes.

New jobless claims rose to 234,000 claims filed as compared to expectations of 219,000 new claims filed. 223,000 new claims were filed the prior week.

What‘s Ahead

This week’s scheduled economic releases include readings from Case-Shiller on home prices, construction spending and pending home sales. ADP and Non-Farm payrolls and the national unemployment rate will also be released.

14 May 2018
By Kevin Gahagan

What’s Ahead For Mortgage Rates This Week – May 14th, 2018

Financial Reports

What’s Ahead For Mortgage Rates This Week – May 14th, 2018Last week’s economic reports included readings on consumer prices, consumer sentiment and weekly readings on mortgage rates and new jobless claims.

Consumer Price Index Increases in April

Consumer prices rose by 0.20 percent in April according to the Commerce Department. Analysts expected prices to rise by 0.30 percent based on a negative reading of -0.10 percent in March. Core consumer prices, which exclude volatile food and energy sectors, eased to 0.10 percent growth in April after growing by 0.20 percent in March. Analysts said that Fed policymakers’ concerns over inflation growth could wane with the easing of core consumer prices.

Mortgage Rates, Mixed New Jobless Claims Unchanged

Freddie Mac reported mixed readings for average mortgage rates; rates for fixed rate mortgages averaged 4.55 percent and were unchanged from the prior week. Average rates for a fifteen-year fixed rate mortgage dipped by two basis points. Rates for a5/1 adjustable rate mortgages averaged 3.77 percent and were higher by eight basis points.

New jobless claims were unchanged 211,000 new claims filed. Analysts expected 215,000 new claims. In other news, the University of Michigan reported that consumer sentiment was also unchanged with an index reading of 98.80 in May.

What‘s Next

This week’s scheduled economic releases include readings From the National Association of Home Builders, Commerce Department reports on housing starts and building permits. Weekly readings on mortgage rates and new jobless claims will also be released.

01 May 2018
By Kevin Gahagan

5 Key Factors That Affect Your Mortgage Rate

Mortgage Rates

5 Key Factors That Affect Your Mortgage RateMany first time home buyers often wonder what factors determine their mortgage rate. Is it their credit score? Is it the type of loan chosen? Is it the size of the loan?

The truth is, there are many factors at play. Mortgage interest rates are not standardized across the board, so they vary from lender to lender and from borrower to borrower.

Here are 5 common factors that determine or affect your mortgage interest rate:

1.    Default Risk

Risk is a key consideration when determining mortgage interest rates. Banks and other lenders are in a risky business because there is always a chance of a borrower defaulting on their loan repayments. This is known as default risk. 

Banks and lenders therefore charge riskier borrowers higher interest rates to discourage them from borrowing, as well as to be able to average their returns between risky and non-risky borrowers. Risk is one of the prime factors that influence your mortgage rate.

2.    Credit Score

Perhaps you are wondering how banks and other lenders determine if you are a risky or non-risky borrower. There are many tools they can use, but your credit score plays a big role. You credit score is based on the borrowing history in your credit report, which summarizes all details about your credit card balances and timely bill repayment. 

If you pay your bills on time and sustain relatively low credit scores, your credit score stays high and lenders view you as a low-risk borrower. Consequently, your mortgage interest rates tend to be lower than a person with a low credit score.

3.    Type of Property You Are Purchasing

Some properties have a higher risk of default compared to others. This is determined by analyzing the historical likelihood of default on different properties; lenders use this analysis as the reason to charge higher mortgage interest rates on riskier ones. 

For example, vacation homes tend to have a higher rate of default compared to single-family homes and lenders charge higher rates for such homes. 

4.    Size of Down Payment

The amount of money you pay upfront on the mortgage also influences its interest rate. A large down payment gives you a lower LTV ratio (loan-to-value), which also decreases the level of risk borne by a lender. A small down payment, on the other hand, gives you a high LTV ratio and thus a higher mortgage interest rate.

5.    Loan Amount

A large loan bears a higher risk than a smaller one simply because there is more money at risk. Most lenders therefore charge higher interest rates on large property loans as compared to smaller ones.

All in all, different lenders offer different rates depending on their style of operation, appetite for risk, or competitiveness in the market. It’s important to search intensively for offers from different lenders for the best mortgage rate. Contact your mortgage professional to help you find out more about mortgage rates and what that means for your next home purchase.